Following the introduction of the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009 (Bill) into Parliament on 25 June 2009, ASIC yesterday released two policy proposals, Consultation Paper 108 Margin lending: training of financial advisers and Consultation Paper 109 Margin lending: Financial requirements, which outline how ASIC proposes to:
- apply training requirements to financial product advisers who advise on margin lending facilities, and
- apply the financial resource requirements to Australian financial services (AFS) licensees who provide financial services in relation to margin lending facility products.
We have been following the proposed changes being made to Chapter 7 of the Corporations Act 2001 in relation to margin lending for some time and have been providing Legal Updates on this topic for the past twelve months.
Under the Bill, a margin lending facility will be regulated as a financial product under Chapter 7 of the Corporations Act 2001. This means that firms offering or advising on margin lending facilities will be required to obtain an Australian Financial Services licence and will be subject to the conduct obligations in Chapter 7, including the obligation to have adequate financial resources and ensure that its representatives are adequately trained and are competent to provide the financial services.
ASIC is now seeking public comment regarding the training requirements and financial requirements for firms that offer or advise on margin lending facilities. ASIC has also taken the opportunity to remind current holders of an Australian financial services licence that they will need to apply for a variation to their existing licence if they intend to provide a financial service in relation to a margin lending facility.
Submissions on the proposals contained in the Consultation Papers close on Monday 10 August 2009. Details on how to make a submission are contained in the Consultation Papers and you can obtain a copy of the Consultation papers at www.asic.gov.au.